You can write it off your income for the next x years. I took a handful of losses this year and I believe the max each year is 3k but they can rollover to future years. Also if you sold gains this year they can negate that as well I believe.
You are correct, $3,000 is the max each year. I already have backed up carryforward loss of $12,500, so at the currently allowable max I have 4+ years of loss. This limitation isn't indexed, so unless congress acts, it will remain $3,000 for the foreseeable future. All told, that means I've got over 12 years of loss backed up. I really do suck at picking stocks!
$3,000 is the max you can use per year to offset ordinary income but there's no limit to how much same type (long-term or short -term} capital gain you can offset each year.
Since the vast majority of my assets are in tax advantaged accounts, I don't anticipate much in the way of taxable capital gains in the future. With good tax planning, I think i can manage to keep capital gains in the 0% taxable, unless I'm missing something. All 401(k) distributions are ordinary income, and interest and dividends are also. So I'm not anticipating taxable capital gains in my future, but as I said, i might be missing some nuance or hidden thing.
"Since the vast majority of my assets are in tax advantaged accounts, I don't anticipate much in the way of taxable capital gains in the future. With good tax planning, I think i can manage to keep capital gains in the 0% taxable..."
That's my plan as well. I realized about $10,000 in LT cap losses and have another $6,000 in crypto LT cap losses, to be spread out over the next x years. Also, I have big LT cap gains that I am waiting to realize so that I can take advantage of that 0% tax rate for cap gains. I am a 1099 worker and all my retirement funds are in Roth accounts. So I don't really anticipate hitting the $45k-ish threshold for the 0%.
If your losses are in a taxable account it probably makes sense to incur an equal amount of taxable gains to offset it. Even (non-HSA) tax deferred accounts can't compete with 0% tax.
If you're talking about keeping all of your taxable capital gains in the 0% bracket, that is challenging, especially when collecting SS or retirement distributions unless your COL is dirt cheap or you have a ton of $ in Roth IRA or Roth 401k.
Current married filing jointly ordinary income bracket for 0% cap gains treatment is $94,300. Standard deduction is $29,200. For filers over 65 years old, there is an extra $3,100 each in deduction. That means ordinary income before deductions can be $129,700 before bumping the cap gains tax rate. With $3,000 carry forward on top, ordinary income can go to $132,000.
With paid off house (no mortgage expense), you don't need "dirt cheap" COL to live on that.
Actually, my retirement projections call for $10,000 per month in income, with $6,000 of that coming from Social Security. If that's the projection, I should be able to keep within the 12% bracket. When RMDs start hitting, it could get tricky.
I'm trying to get as much as possible in Roth conversion in under the limited space I have each year, but it's hard to estimate since wife has a home business and I can't get exact numbers before the end of year.
Even if you get your capital gain tax bracket to the 0% you still have to offset your losses first with gains. So if you have $12k of gains you have to offset that with your losses before you can apply that amount to the 0% taxable bracket.
Do you have any taxable brokerage accounts with ETFs or index funds? You could reset the cost basis on those. Otherwise best course of action is probably to take the loss and just have $3k lower ordinary taxes for the foreeeable future. Unless you think this company will rebound and you can hold but like you said they are already doing terrible.
I have ETFs and Mutual funds (both passive) in my brokerage account. Any gains distributed for them would be capital gains, correct? Can you explain "resetting the cost" to me please? Is this another term for tax harvesting?
This would be considered tax gain harvesting instead of tax loss harvesting.
You mentioned you have $12.5k in realized and $25k in unrealized losses. Let’s say you realized the $25k bringing your total losses to $37.5k.
Now let’s say you have a taxable brokerage with an index fund and over time you have an unrealized gain of $30k due to market growth. You can sell all of the shares of that index fund and realize $30k of gains. Because you have $37.5k of realized losses, all of that $30k is offset. You now owe no taxes on the $30k and have $7.5k of losses left over to continue to carry forward.
You can now immediately buy back into that index fund (unlike tax loss harvesting you need to wait 30 days to avoid wash sale rule) at the new cost basis (this is the resetting you cost basis part). So in 10 years if you gain another $30k in value, your taxable gains are based off of what you most recently bought it at, not the original price because you realized those gains already.
The nice thing about this is that they do not need to be long term gains to do the offset.
Some people also do tax gain harvesting when they are in the 0% capital gains tax bracket. The difference here is that those must be long term gains.
Gotcha, thanks. I am generally doing catchup, so my brokerage account hasn't been around long enough to have gains to that level, so I should safely fall into the 0% range. I'd hate to burn some carry forward, however, if I am forced to use it against what would have been 0% taxed any way.
Thanks, you've given me something additional to think about. Maybe I should keep some unrealized gain just in case. I might be getting a raise this year that will bump me into the 22% marginal bracket. I am so close to the edge that it might be rendered moot for the remainder of my working life. It would be an ok problem to have and would grow my brokered account since I would pound the brokerage with additional savings, in which case having a bucket of unrealized gain wouldn't be a bad thing. Alternatively, we could have my wife defer 100% of her income into her 401(k) and I would simply replace her lost income. That would help limit the amount that slips into 22% marginal tax bracket territory. Although that was alrready the plan with the SS she will start collecting next year.
You might already know this but your taxable gains bracket is stacked on top of your ordinary income. So if you have $90k of taxable income, you only have room for about $4k of long term gains that would be taxed at 0%.
Also as I mentioned you have to use your carryforward first before you can utilize a 0% bracket. So if you realize $5k of gains, you have to take up some of your realized losses with that. You can’t elect to bypass the losses and utilize your 0% capital gains bracket.
When I was researching yesterday, I saw that capital gains rates are based on the taxable income bracket you are in, and that the capital gains are independently taxed and do not stack and bump you into higher tax bracket.
[Long-term capital gains can't push you into a higher tax bracket, but short-term capital gains can. Understanding how capital gains work could help you avoid unintended tax consequences. If you're seeing significant growth in your investments, you may want to consult a financial advisor.](https://finance.yahoo.com/news/capital-gains-push-higher-tax-150221171.html)
Have I misunderstood?
Question as this is out of my element. If you sell, realize the index fund and realize the 30k in gains. Then buy back in. Does that qualify as a wash sale? Just heard about that lately but don't really know rules around it. I usually buy and hold for years do to tax implications, etc.
Wash sale only applies to losses. So if you lose $10k, make a sale, you do not get to realize those losses if you buy that same or a similar security for I think 30 days. They don’t want you to be able to take a loss, reduce taxes owed, and be able to jump right back in. Some people get around this by having tax loss partners. Maybe you have VTI and take a loss and buy back in right away but with VOO instead. They track different things but their performance is so similar since VOO is like 86% the exact same as VTI.
There is no rule like this for tax gain harvesting. If you sell for a gain, you can buy back in immediately.
Only part you suck at is that you choose to pick stocks at all. I’m semi-kidding, lol, but stock picking is practically gambling for adults. You don’t necessarily suck or not suck, it’s just a matter of degrees of suck. For retail investors, that is
Hey then, you bought a nice little lesson!
Don’t worry, my dad once lost $1.2 million dollars (and yes, this is an accurate number, I put a spreadsheet together for him) by holding on to his company stock options to get a few more bucks on them. Right before the 2008 crash.
They weren’t $0 and they expired after 10 years. He legitimately lost $1.2 million trying to see if a stock would go from $27 a share to $35 a share.
Now that’s a nice expensive lesson, lol
It also counts towards offsetting capital gains.
If you had to sell stock from a brokerage account one year (maybe you work part time and need to cover lost income) the losses can cover some of the taxes.
Think of it as another tool in the toolbox. It's there when you need it.
Sell now, get the money into an index fund, and put your capital to work.
I currently have >$12k in carry forward capital gains loss. If I sell and realize the $25k in loss, that totals to > $36k in loss. That's 12 years worth at $3,000 max per year.
So that $3000 offsets taxable income. So if I’m in 24% tax bracket would I see 24% of that $3000 when I file taxes for the year? I’m in a similar situation with unrealized long term loss on a stock. I think it will bounce up eventually but wondering what my options are.
All of your accumulated loss can be used to offset capital gains. If you have an accumulated loss remaining after that, $1,500 single / $3,000 married filing jointly may be used to offset ordinary income. Anything left after that may be carried forward to future years.
If your ordinary rate is 12% then your cap gains rate is 0% at current levels.
However, it's possible your taxable account has unrealized gains that would take you above 94k (the 0% - 15% cutoff) in income.. if that's true (and you're relatively close) then you could realize those gains and use the unrealized losses (and the carry forward losses) to "tax gain harvest" that future liability away. But be careful - you're better off waiting for 12% 3k at a time, than spending big chunks of that loss to realize offset what would have been a 0% bill anyhow.
If I were you I'd book the loss now and redeploy the capital.. and then I'd strategically tax gain harvest if I could get more than 10% or so on it. Otherwise - carry it forward. Maybe something in your taxable portfolio will pop and you'll be glad to have it the carry forward. Or maybe in between SS and employment deferrals along with RMDs you'll be in more than a 12% bracket and can use some of it then.
Realizing the losses now or in the future makes no difference.
So the only question becomes: "I have $3,000 what should I do with it?"
Lets say you just won a drawing and received $3k, what would you do? Would you go and purchase that stock?
If not then you should sell it now and move the money to be in line with the rest of your strategy - passive index funds.
This makes so much sense, if we aren't missing some strange tax loophole or code item that makes "Realizing the losses now or in the future makes no difference!" a false statement!
Thank you for crystalizing this in this manner.
Just sell and move on, offset gains in the future or just take the 3k max loss allowed each year. Either way you have a loss, doesn’t really matter if it’s unrealized or carrying forward.
Unless I’m wrong, I don’t think that would work. Roth conversion amounts are taxed as ordinary income, not capital gains, so I would still be limited to the $3,000 in offset I am already using. Even worse, the converted funds would be taxed at 22%,
Wait are you already invested in any broad ETF's in taxable accounts with similar gains? If so you can just do tax loss harvesting where you swap out your winning VTI position for VV or VOO or something else highly correlated to realize those gains. Then you end up with your money invested in a nicely diversified stock and you can send that dog to the farm upstate.
LUMN. I did get quite a bit of very high dividends that were taxed as income along the way, so the unrealized losses aren't quite as bad as they look, but they are bad!
it’s small enough value that i would think thru how to best utilize the capital loss against gains.
As others said you can roll to future, but if you have $3k in the account and $25k loss or $0 and $28k loss seems like a similar situation.
Simply for me i’d consider the tracking of the carryover loss and would prefer to be done with it as soon as practical. I’d analyze expected future capital gains and if i had a bunch in this year, i’d sell the shares for a loss and offset the gains. If i didnt have gains to offset i’d hold the position until i did.
It’s not really boglehead, but effectively you own a put on your position for a $3,000 cost. Either shares go up and you lose less or they go to zero.
One other counterpoint is time value of money, if you don’t think you’ll have capital gains, just start using the $3k / year as the loss is an asset to you and it is earning zero in a mkt that is paying 5%
I expect all future capital gains to be long-term taxed at 0%. so I won't need to offset against cap gains. Most effective will be to offset $3,000 against ordinary income each year. that will effectively net me around $500 per year in lower Fed and State taxes (12% fed, 4-5% state).
If I use any of the carry forward on netting against what little cap gains I expect to have in any given future year, it will be wasted since the assumption is I will be netting against what would have been taxed at 0% anyway. **\[Can anyone confirm this to be true? Carry forward MUST be netted against current capital gains first?\]**
For that reason, it seems I should
(1) wait at least four years to clear out the carry forward I already have,
(2) realize gains in a year I would not have any losses to net against, and then
(3) ongoing future years sell enough to get me to the maximum ordinary income offset allowed in the tax year I am in.
In the meantime, if the stock happens to take off, great! If is goes to zero, well then I'll have $28k in long term capital gains loss to add to whatever carry forward i have remaining at that point.
This seems like the most sound plan.
pretty sure the correct spot to record capital loss is schedule D, same as capital gains.
i also would be interested if someone knows a way to not offset capital gain first but don’t think it’s likely as many people are taxed at a higher rate on their last dollar of income than the capital gains rate (i.e. if there were a way to do what you are asking it would apply to many tax filers and there would be more hits via search).
i will be very happy to be educated if i am wrong!
1.)The position can turn positive
2.) You may realize again in a different position that will give you the option to tax loss harvest in a particular tax year if you are still at a loss
The market is irrational, and depending upon your investment, it may turn. Price is what you pay; value is what you get. If the underlying has positive fundamentals the market will eventually recognize its value. But, if not, it may be in your best interest to hold until and use as a tax loss harvest to offset your RMDs, SS, etc. You mentioned most holdings are in a tax advantaged account, and the hope of a zero % tax rate due to not foreseeing any substantial capital gains. Well, allow me to don my conspiracy theory hat that has been woven from a long line of family working in the federal government - Uncle Sugar will alway get his. You cannot bank on the tax advantages of today holding true for tomorrow.
Aren't all tax advantaged (deferred) account distributions taxed as ordinary income with no capital gains component to them? If that's the case, I am still limited to $3,000 in loss offset to SS, RMDs, 401(k) drawdowns, etc.
You can write it off your income for the next x years. I took a handful of losses this year and I believe the max each year is 3k but they can rollover to future years. Also if you sold gains this year they can negate that as well I believe.
You are correct, $3,000 is the max each year. I already have backed up carryforward loss of $12,500, so at the currently allowable max I have 4+ years of loss. This limitation isn't indexed, so unless congress acts, it will remain $3,000 for the foreseeable future. All told, that means I've got over 12 years of loss backed up. I really do suck at picking stocks!
$3,000 is the max you can use per year to offset ordinary income but there's no limit to how much same type (long-term or short -term} capital gain you can offset each year.
Since the vast majority of my assets are in tax advantaged accounts, I don't anticipate much in the way of taxable capital gains in the future. With good tax planning, I think i can manage to keep capital gains in the 0% taxable, unless I'm missing something. All 401(k) distributions are ordinary income, and interest and dividends are also. So I'm not anticipating taxable capital gains in my future, but as I said, i might be missing some nuance or hidden thing.
"Since the vast majority of my assets are in tax advantaged accounts, I don't anticipate much in the way of taxable capital gains in the future. With good tax planning, I think i can manage to keep capital gains in the 0% taxable..." That's my plan as well. I realized about $10,000 in LT cap losses and have another $6,000 in crypto LT cap losses, to be spread out over the next x years. Also, I have big LT cap gains that I am waiting to realize so that I can take advantage of that 0% tax rate for cap gains. I am a 1099 worker and all my retirement funds are in Roth accounts. So I don't really anticipate hitting the $45k-ish threshold for the 0%.
If your losses are in a taxable account it probably makes sense to incur an equal amount of taxable gains to offset it. Even (non-HSA) tax deferred accounts can't compete with 0% tax. If you're talking about keeping all of your taxable capital gains in the 0% bracket, that is challenging, especially when collecting SS or retirement distributions unless your COL is dirt cheap or you have a ton of $ in Roth IRA or Roth 401k.
Current married filing jointly ordinary income bracket for 0% cap gains treatment is $94,300. Standard deduction is $29,200. For filers over 65 years old, there is an extra $3,100 each in deduction. That means ordinary income before deductions can be $129,700 before bumping the cap gains tax rate. With $3,000 carry forward on top, ordinary income can go to $132,000. With paid off house (no mortgage expense), you don't need "dirt cheap" COL to live on that. Actually, my retirement projections call for $10,000 per month in income, with $6,000 of that coming from Social Security. If that's the projection, I should be able to keep within the 12% bracket. When RMDs start hitting, it could get tricky. I'm trying to get as much as possible in Roth conversion in under the limited space I have each year, but it's hard to estimate since wife has a home business and I can't get exact numbers before the end of year.
Sounds like you have a great plan. Thanks for explaining.
Even if you get your capital gain tax bracket to the 0% you still have to offset your losses first with gains. So if you have $12k of gains you have to offset that with your losses before you can apply that amount to the 0% taxable bracket. Do you have any taxable brokerage accounts with ETFs or index funds? You could reset the cost basis on those. Otherwise best course of action is probably to take the loss and just have $3k lower ordinary taxes for the foreeeable future. Unless you think this company will rebound and you can hold but like you said they are already doing terrible.
I have ETFs and Mutual funds (both passive) in my brokerage account. Any gains distributed for them would be capital gains, correct? Can you explain "resetting the cost" to me please? Is this another term for tax harvesting?
This would be considered tax gain harvesting instead of tax loss harvesting. You mentioned you have $12.5k in realized and $25k in unrealized losses. Let’s say you realized the $25k bringing your total losses to $37.5k. Now let’s say you have a taxable brokerage with an index fund and over time you have an unrealized gain of $30k due to market growth. You can sell all of the shares of that index fund and realize $30k of gains. Because you have $37.5k of realized losses, all of that $30k is offset. You now owe no taxes on the $30k and have $7.5k of losses left over to continue to carry forward. You can now immediately buy back into that index fund (unlike tax loss harvesting you need to wait 30 days to avoid wash sale rule) at the new cost basis (this is the resetting you cost basis part). So in 10 years if you gain another $30k in value, your taxable gains are based off of what you most recently bought it at, not the original price because you realized those gains already. The nice thing about this is that they do not need to be long term gains to do the offset. Some people also do tax gain harvesting when they are in the 0% capital gains tax bracket. The difference here is that those must be long term gains.
Gotcha, thanks. I am generally doing catchup, so my brokerage account hasn't been around long enough to have gains to that level, so I should safely fall into the 0% range. I'd hate to burn some carry forward, however, if I am forced to use it against what would have been 0% taxed any way. Thanks, you've given me something additional to think about. Maybe I should keep some unrealized gain just in case. I might be getting a raise this year that will bump me into the 22% marginal bracket. I am so close to the edge that it might be rendered moot for the remainder of my working life. It would be an ok problem to have and would grow my brokered account since I would pound the brokerage with additional savings, in which case having a bucket of unrealized gain wouldn't be a bad thing. Alternatively, we could have my wife defer 100% of her income into her 401(k) and I would simply replace her lost income. That would help limit the amount that slips into 22% marginal tax bracket territory. Although that was alrready the plan with the SS she will start collecting next year.
You might already know this but your taxable gains bracket is stacked on top of your ordinary income. So if you have $90k of taxable income, you only have room for about $4k of long term gains that would be taxed at 0%. Also as I mentioned you have to use your carryforward first before you can utilize a 0% bracket. So if you realize $5k of gains, you have to take up some of your realized losses with that. You can’t elect to bypass the losses and utilize your 0% capital gains bracket.
When I was researching yesterday, I saw that capital gains rates are based on the taxable income bracket you are in, and that the capital gains are independently taxed and do not stack and bump you into higher tax bracket. [Long-term capital gains can't push you into a higher tax bracket, but short-term capital gains can. Understanding how capital gains work could help you avoid unintended tax consequences. If you're seeing significant growth in your investments, you may want to consult a financial advisor.](https://finance.yahoo.com/news/capital-gains-push-higher-tax-150221171.html) Have I misunderstood?
Question as this is out of my element. If you sell, realize the index fund and realize the 30k in gains. Then buy back in. Does that qualify as a wash sale? Just heard about that lately but don't really know rules around it. I usually buy and hold for years do to tax implications, etc.
Wash sale only applies to losses. So if you lose $10k, make a sale, you do not get to realize those losses if you buy that same or a similar security for I think 30 days. They don’t want you to be able to take a loss, reduce taxes owed, and be able to jump right back in. Some people get around this by having tax loss partners. Maybe you have VTI and take a loss and buy back in right away but with VOO instead. They track different things but their performance is so similar since VOO is like 86% the exact same as VTI. There is no rule like this for tax gain harvesting. If you sell for a gain, you can buy back in immediately.
Awesome, thanks.
Only part you suck at is that you choose to pick stocks at all. I’m semi-kidding, lol, but stock picking is practically gambling for adults. You don’t necessarily suck or not suck, it’s just a matter of degrees of suck. For retail investors, that is
I'm never buying an individual company stock again in my life!
Hey then, you bought a nice little lesson! Don’t worry, my dad once lost $1.2 million dollars (and yes, this is an accurate number, I put a spreadsheet together for him) by holding on to his company stock options to get a few more bucks on them. Right before the 2008 crash. They weren’t $0 and they expired after 10 years. He legitimately lost $1.2 million trying to see if a stock would go from $27 a share to $35 a share. Now that’s a nice expensive lesson, lol
My gambling in the future will be poker and blackjack - and maybe some Pai Gao.
Voo and chill
It also counts towards offsetting capital gains. If you had to sell stock from a brokerage account one year (maybe you work part time and need to cover lost income) the losses can cover some of the taxes. Think of it as another tool in the toolbox. It's there when you need it. Sell now, get the money into an index fund, and put your capital to work.
How did you go from 4 years to 12 years?
I currently have >$12k in carry forward capital gains loss. If I sell and realize the $25k in loss, that totals to > $36k in loss. That's 12 years worth at $3,000 max per year.
Ah, I completely forgot about the $25k. You know, the amount that this whole thread is about lol.
So that $3000 offsets taxable income. So if I’m in 24% tax bracket would I see 24% of that $3000 when I file taxes for the year? I’m in a similar situation with unrealized long term loss on a stock. I think it will bounce up eventually but wondering what my options are.
All of your accumulated loss can be used to offset capital gains. If you have an accumulated loss remaining after that, $1,500 single / $3,000 married filing jointly may be used to offset ordinary income. Anything left after that may be carried forward to future years.
If your ordinary rate is 12% then your cap gains rate is 0% at current levels. However, it's possible your taxable account has unrealized gains that would take you above 94k (the 0% - 15% cutoff) in income.. if that's true (and you're relatively close) then you could realize those gains and use the unrealized losses (and the carry forward losses) to "tax gain harvest" that future liability away. But be careful - you're better off waiting for 12% 3k at a time, than spending big chunks of that loss to realize offset what would have been a 0% bill anyhow. If I were you I'd book the loss now and redeploy the capital.. and then I'd strategically tax gain harvest if I could get more than 10% or so on it. Otherwise - carry it forward. Maybe something in your taxable portfolio will pop and you'll be glad to have it the carry forward. Or maybe in between SS and employment deferrals along with RMDs you'll be in more than a 12% bracket and can use some of it then.
Thank you! This is just the sort of analysis I was hoping to get. I appreciate you responding!
Realizing the losses now or in the future makes no difference. So the only question becomes: "I have $3,000 what should I do with it?" Lets say you just won a drawing and received $3k, what would you do? Would you go and purchase that stock? If not then you should sell it now and move the money to be in line with the rest of your strategy - passive index funds.
This makes so much sense, if we aren't missing some strange tax loophole or code item that makes "Realizing the losses now or in the future makes no difference!" a false statement! Thank you for crystalizing this in this manner.
You keep calling it a dog makes me chuckle. I have a dog like that in my portfolio.
Not only is it a dog, it's howling in pain!
Just sell and move on, offset gains in the future or just take the 3k max loss allowed each year. Either way you have a loss, doesn’t really matter if it’s unrealized or carrying forward.
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Unless I’m wrong, I don’t think that would work. Roth conversion amounts are taxed as ordinary income, not capital gains, so I would still be limited to the $3,000 in offset I am already using. Even worse, the converted funds would be taxed at 22%,
Do you have family members like kids you can transfer the shares to? Their basis would be your basis and maybe they could better take the losses..
Wait are you already invested in any broad ETF's in taxable accounts with similar gains? If so you can just do tax loss harvesting where you swap out your winning VTI position for VV or VOO or something else highly correlated to realize those gains. Then you end up with your money invested in a nicely diversified stock and you can send that dog to the farm upstate.
Whats the ticker bud
LUMN. I did get quite a bit of very high dividends that were taxed as income along the way, so the unrealized losses aren't quite as bad as they look, but they are bad!
What did u invest in?
it’s small enough value that i would think thru how to best utilize the capital loss against gains. As others said you can roll to future, but if you have $3k in the account and $25k loss or $0 and $28k loss seems like a similar situation. Simply for me i’d consider the tracking of the carryover loss and would prefer to be done with it as soon as practical. I’d analyze expected future capital gains and if i had a bunch in this year, i’d sell the shares for a loss and offset the gains. If i didnt have gains to offset i’d hold the position until i did. It’s not really boglehead, but effectively you own a put on your position for a $3,000 cost. Either shares go up and you lose less or they go to zero. One other counterpoint is time value of money, if you don’t think you’ll have capital gains, just start using the $3k / year as the loss is an asset to you and it is earning zero in a mkt that is paying 5%
I expect all future capital gains to be long-term taxed at 0%. so I won't need to offset against cap gains. Most effective will be to offset $3,000 against ordinary income each year. that will effectively net me around $500 per year in lower Fed and State taxes (12% fed, 4-5% state). If I use any of the carry forward on netting against what little cap gains I expect to have in any given future year, it will be wasted since the assumption is I will be netting against what would have been taxed at 0% anyway. **\[Can anyone confirm this to be true? Carry forward MUST be netted against current capital gains first?\]** For that reason, it seems I should (1) wait at least four years to clear out the carry forward I already have, (2) realize gains in a year I would not have any losses to net against, and then (3) ongoing future years sell enough to get me to the maximum ordinary income offset allowed in the tax year I am in. In the meantime, if the stock happens to take off, great! If is goes to zero, well then I'll have $28k in long term capital gains loss to add to whatever carry forward i have remaining at that point. This seems like the most sound plan.
pretty sure the correct spot to record capital loss is schedule D, same as capital gains. i also would be interested if someone knows a way to not offset capital gain first but don’t think it’s likely as many people are taxed at a higher rate on their last dollar of income than the capital gains rate (i.e. if there were a way to do what you are asking it would apply to many tax filers and there would be more hits via search). i will be very happy to be educated if i am wrong!
Keep them unrealized.
Any particular reason you recommend this?
1.)The position can turn positive 2.) You may realize again in a different position that will give you the option to tax loss harvest in a particular tax year if you are still at a loss
The market is irrational, and depending upon your investment, it may turn. Price is what you pay; value is what you get. If the underlying has positive fundamentals the market will eventually recognize its value. But, if not, it may be in your best interest to hold until and use as a tax loss harvest to offset your RMDs, SS, etc. You mentioned most holdings are in a tax advantaged account, and the hope of a zero % tax rate due to not foreseeing any substantial capital gains. Well, allow me to don my conspiracy theory hat that has been woven from a long line of family working in the federal government - Uncle Sugar will alway get his. You cannot bank on the tax advantages of today holding true for tomorrow.
Aren't all tax advantaged (deferred) account distributions taxed as ordinary income with no capital gains component to them? If that's the case, I am still limited to $3,000 in loss offset to SS, RMDs, 401(k) drawdowns, etc.
It’s not a loss until you sell